Arrears put brokers under the microscope

by MBN25 Nov 2014

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Arrears put brokers under the microscope

By Jordan Maxwell
The latest arrears numbers from CMHC could be pointing an accusatory finger at some Western brokers at the same time they appear to pat others on the back for their advice to clients.

The province with the second highest mortgage arrears rate, B.C., borders the province with the second lowest one, Alberta.

There’s some irony there considering B.C. homeowners, according to Canada’s largest mortgage insurer, have an average mortgage amount of $285,700, which is a full $35K less than that of the average Albertan.

Still, the arrears rate for B.C. is 0.44 per cent while Alberta’s is 0.27 per cent.

The discrepancy has a lot to do with the higher costs of buying a home, say economists, but it may also suggest that brokers need to do a better job of advising clients around what they can and cannot afford to buy.

Still, Diana Petramala, an economist at TD Bank, said that the numbers are to be expected considering that B.C.’s urban hub is the most expensive place to live in Canada.

“There’s a higher concentration of people buying condos in Vancouver and other places in B.C. and typically we see a high rate of homebuyers in arrears because of the cost of living versus income,” she told MortgageBrokerNews.ca. “Costs are higher than income in most cases, which leads to the arrears, but the 0.44 is still quite low. It was a lot higher in the mid-90s.”

The 0.44 figure is higher than the national average, which is 0.33 per cent according to CMHC numbers and after the first half of the year, stats show that 1,618 homeowners were at least 90 days behind.

Nationally, 0.33 per cent of the $551 billion in mortgages insured by CMHC are in arrears up from 0.31 according to CMHC figures.

Again, nationally, the average CMHC insured mortgage is set at $231,500 with most putting at least eight per cent down compared to nine per cent in B.C.

While the numbers raise flags with those in B.C., they also show the resilience of Canadian homeowners. Homebuying is increasing at record levels and mortgage credit is growing at its slowest pace since 2001, according to TD bank figures.

More Canadians also shedding household debt a lot faster because of lower mortgage lending rates and an aggressive approach to paying off mortgage debt. What’s more, contributions from families on the initial down payment of an insured mortgage loan have also shrunken overall mortgage amounts, according to a report from TD.

Are there any stats on how many of those BC mortgages in arrears are originated by Mortgage Brokers? It's awfully presumptuous to say that brokers need to do a better job advising their clients on affordability when, in my experience as a BC broker, the financial institutions are the ones bending the rules at the branch level, getting people into mortgages they cannot afford.